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Purchase Invoice Serial Number

Updated on :  

08 min read.

A purchase invoice is important for a small, mid-sized, or large corporate business. It helps in budgeting, managing spending, and controlling purchases through tracking, approval, and ensuring GST compliance, such as availing input tax credit (ITC) and observance of company policy. Good invoice management helps businesses in improving their cash flow.

Why Should You Record Purchase Invoices and Where to Record?

When businesses receive the inventory or services, they post the purchase invoice in their enterprise resource planning (ERP) or accounting software to update financial records and inventory. They activate payment to the supplier as per the payment terms.

A purchase invoice enables a business to 

  • Record the cost of purchases and track its accounts payable. 
  • Track their purchase invoices to control their inventory
  • Update inventory levels to minimise inventory costs. 
  • Book the cost of purchases, including service expenses and inventory value, which contributes to profit figures and other Key Performance Indicators (KPIs) for a business.

A purchase invoice is a crucial document under the Goods and Services Tax (GST) law. It not only indicates the supply of goods or services but is also essential for the recipient business to avail Input Tax Credit (ITC). A registered taxpayer cannot avail ITC unless he has a legit purchase invoice or a debit note. Hence, the significance of a purchase invoice under GST can’t be over-emphasised. It suffices to say that a purchase invoice is a primary document evidencing the supply and is vital for availing ITC under GST.

Prerequisites to Keep in Mind While Recording Purchase Invoice

There are some fundamental prerequisites of good bookkeeping that every business should consider. Some of the important ones are listed below:

  • Every purchase invoice should be documented promptly and promptly.
  • A purchase invoice should be directed to the accounts payable team for processing on or before the end of the month in which it is received.
  • Purchase invoices should be recorded comprehensively and chronologically
  • An invoice should be legible so that the company staff can assign each purchase invoice to a specific business transaction. 
  • Before processing an invoice, a business must check the authenticity and legibility of every invoice to avoid the risk of fraud.
  • A purchase invoice should offer detailed information about the purchase transaction.

Should You Serially Number Your Purchase Invoice While Recording?

An invoice number is just a way to uniquely mark a purchase invoice to help keep track of purchase transactions. 

Consecutive or serial invoice numbers can help an organisation ensure that each purchase invoice is unique. Each sales transaction is organised and recorded for accounting and avoiding disputes between vendors and customers. A serial invoice numbering system helps a business avoid duplicate payments that could cause significant losses.

However, there’s no specific legal requirement for serially numbering a purchase invoice, but finding an efficient method of systematically recording purchase transactions is ideal for any business.

As per the GST invoice rules, it’s mandatory to have important fields like invoice number, invoice date, supplier name, etc., in a sales invoice. Hence, a buyer should ensure that these fields, including the invoice number, should be unique in his purchase invoice and legible when accounting the transaction as it will be used for claiming the input tax credit. But a buyer is not required to assign any serial number for the purchase invoices received.

However, under the reverse charge mechanism, self-invoicing or billing must be done when a registered taxpayer makes any purchases from an unregistered supplier. Self-invoicing is essential where the supplier won’t issue a GST invoice to the buyer under reverse charge scenarios. 

Hence, the buyer is responsible for paying taxes on behalf of the supplier in such cases and claiming the input tax credit. However, the buyer should ensure a consecutive serial number for such invoices, and it should not exceed 16 characters. Also, the buyer needs to ensure that such invoice number is unique from that of other financial years.

On the other hand, for a seller, it is mandatory to maintain sales invoices serially numbered throughout the financial year. Rule 46 of the Central Goods and Services Tax (CGST) Rules, 2017, deals with the contents of an invoice applicable for a registered taxpayer. As per this rule, a sales invoice must contain a consecutive invoice number up to 16 characters, and each invoice should have a unique number for that particular financial year.